Over the past decades the use of swaps to cope with interest-rate and currency-rate risks has grown tremendously in the debt management of local governments. Through comparative case studies of German, British, and U.S. municipalities, this project seeks to explore systematically the expectations city treasurers have regarding swaps and how these expectations have changed over time. Drawing upon insights from political science, behavioural economics, and economic sociology, we will examine how cognitive mechanisms, professions, and historical experiences shape the formation of expectations. The insights generated through this project will contribute to the debates about the changing state-financial-market relationship and to the development of a theory of expectation formation. The time period of the project ranges from the early 1980s until today.